I'm a pretty active investor. Cash routinely flows into my brokerage accounts from passive income sources and recurring transfers. I like to immediately put most of the money to work to generate more passive income.
High-quality, high-yielding dividend stocks are my go-to investment. I routinely add to my favorite positions. This month, I plan to continue buying shares of Realty Income (NYSE: O) , Brookfield Infrastructure (NYSE: BIPC) (NYSE: BIP) , and Enbridge (NYSE: ENB) . Here's why I can't seem to get enough of these top-notch income stocks.
The name says it all
Realty Income has a phenomenal record of paying dividends. The diversified REIT has declared 647 consecutive monthly dividends . It has increased its payout 126 times since going public in 1994, including for the past 107 straight quarters, growing its payout at a 4.3% compound annual rate.
I fully expect that steady upward trend in the payout, which at a 6% yield is well above the S&P 500 's 1.3% average, to continue. Realty Income's internal growth drivers -- rising rents and using retained cash flow after paying dividends to fund new investments -- should increase its adjusted funds from operations ( FFO ) by about 2% per share each year . That provides a solid foundation for a steadily rising dividend.
Meanwhile, the company estimates it can add about 0.5% to its FFO per share growth rate for every $1 billion of externally funded acquisitions it makes. Those acquisitions are financed by selling stock and issuing new debt. Realty Income conservatively estimates it can externally fund $4 billion to $6 billion of acquisitions each year . When added to its internal growth drivers, this should push its FFO per share growth rate to about 4% to 5% annually, in line with its historical growth rate. With trillions of dollars in commercial real estate across the U.S. and Europe, Realty Income should have plenty of new investment opportunities.
The high-powered growth should continue
Brookfield Infrastructure has done an excellent job of increasing its dividend. The global infrastructure operator has grown its payout at a 9% compound annual rate since 2009.
It should have plenty of fuel to grow its payout in the future. Brookfield expects a trio of organic drivers -- inflation-indexed rate increases, volume growth as the global economy expands, and expansion projects funded with retained cash flow after paying dividends -- to boost its FFO per share by 6% to 9% annually. The company has a large backlog of expansion projects underway, including several data center developments and two new semiconductor fabrication facilities it's helping finance.
On top of organic growth, Brookfield has an excellent record of making accretive acquisitions. It recently agreed to buy an additional 10% interest in its Brazilian integrated rail and logistics provider, and it's working to purchase a portfolio of telecom towers in India. It's funding these deals by recycling capital . Brookfield believes that acquisitions will help drive its FFO growth rate into the double digits. That easily supports its plan to increase its dividend, which yields around 5%, by 5% to 9% per year.
Ample fuel to continue growing
Enbridge has paid dividends to its investors for nearly seven decades. The Canadian pipeline and utility giant has increased its payout every year for the past 29.
The company should have plenty of fuel to continue increasing its dividend, which yields a monster 7.5% these days, for the next several years. It's in the process of closing a once-in-a-generation acquisition of three high-quality gas utilities in the United States. That deal will immediately boost its earnings, enhance its diversification and income stability, and add to its growth profile.
In addition, the company has a robust organic growth backlog. It has billions of dollars in commercially secured projects under construction that should come online through 2028. These projects should help grow its cash flow per share by 3% annually through 2026 and by a roughly 5% per year pace after that. That visible earnings growth , along with its top-notch financial profile , positions Enbridge to continue increasing its dividend each year.
High-quality income stocks
Realty Income, Brookfield Infrastructure, and Enbridge are my ideal income stocks. They pay well above-average dividends, and those payouts should continue rising steadily in the future. Those factors are driving my decision to continue buying these top-notch income stocks hand over fist in July.
Matt DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Enbridge, and Realty Income. The Motley Fool has positions in and recommends Enbridge and Realty Income. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy .
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